Auto Industry’s Wild Ride Gets Smoother

The state of the auto nation is shaky at the moment, but all is not lost. Offsetting the unrelentingly negative news are 2009 highlights like a 69 percent spike in Sorento model sales, a 48 percent increase in Sedona sales, and the successful launch of the economically priced Hyundai Genesis and Kia Soul, both targeting younger drivers.

Conversely, luxury vehicles that attract middle-age consumers managed to outpace the market, although the category experienced a long-tail effect, a two- to three-month delay from shopping to closing the sale. Only one domestic car manufacturer — Lincoln — outperformed the market, even though sales remained in negative territory on a year-to-year basis.

Fueling sales
The Nielsen online panel, comprising 250,000 individuals representing the U.S. online population, detected another hopeful sign for new vehicle sales based on Internet new vehicle shopping patterns. While online new car shopping downshifted by 9 percent, this represented a mere fraction of the precipitous 37 percent sales decline, suggesting the existence of pent-up demand. Consumers sought out roadworthy vehicles like the new Ford Fusion, proven gas sippers like the Toyota Prius and Honda Civic, or buttoned up their wallets and opted to maintain their current car or buy used.

Foreign automakers benefited disproportionately from escalating gas prices because of the consumer perception that their vehicles — especially hybrid and diesel models — are more fuel-efficient. German and Korean automakers realized the largest gains in online vehicle shopping activity, posting 1.7 and 2.2 percentage point share increases, respectively, while their U.S. counterpart slid 5.5 percentage points. The Volkswagen Jetta and CC models, BMW 1- and 3-series and Mercedes-Benz E class were among the variants driving shopping inquiries.

Model behavior
Sport utility vehicles, with some 61 models available, continue to hold the “most shopped” position and rank No. 1 in the U.S. for share of new vehicle shopping. Although activity waned with rising gas prices, consumers appeared to be hedging their bets, shopping longer in the hopes that gas costs would plummet and justify the purchase. And while the government is putting pressure on automakers to reduce these larger vehicles from their fleet, demand at the moment is not supporting this mandate.

The biggest disappointment among model types proved to be the basic economy vehicle, which peaked with a nearly 30 percent online shopping share in May 2008 when gas prices were at the highest (around $4.00/gallon), and dropped to half that a year later when gas prices declined to about $2.00/gallon.

Upper middle car models like the Fusion, Camry, Accord and Altima maneuvered into the second most shopped segment by April 2009, with hybrid variants moving the sales needle. Hybrids remain an exciting, but emerging segment, as consumers wrap their heads around the concept and take their time investigating the genre. Luxury entrants cruised along with steady sales, experiencing a boost from the Hyundai Genesis introduction. Luxury models attract aspirational buyers who savor the shopping experience and take their time to consider price before taking the plunge, elongating the buying cycle.

Trading places
Rankings of the top 25 automakers based on online shopping activity wheeled in some interesting changes, with Kia jumping 11 slots from No. 24 last April to No. 13 in April 2009. Volkswagen leapfrogged seven spots from No. 15 to No. 8courtesy of the CC — its most-searched vehicle on the Internet. The redesigned Forester sparked consumer interest as well and elevated Subaru to the No. 22 slot, up from No. 27.

Saturn fell out of orbit, dropping 13 spots to No. 23, followed by Buick’s 12-point decline, GMC’s six-point downslide and Pontiac’s five-point plunge. A heads-up to Volkswagen, the beneficiary of online buzz over the curvy CC: while initial online interest spikes rapidly, it can quickly taper off. The trick is to sustain interest over time and keep the vehicle top of mind with prospective buyers.